Stumbling over success

LAST week, a Reuters special report examined a topic that is painfully familiar for businesses and policymakers in this country – port congestion and its far-reaching impact on a national economy. The economy in question was not the Philippines, however, but Asean neighbor Myanmar, whose rapidly growing economy is putting severe pressure on outdated infrastructure suffering from years of neglect under the former military government.

In 2011, the year the military relinquished its direct control over Myanmar’s government, the country’s GDP growth reached a fairly respectable 5.91 percent. In the years since, growth has accelerated even more: 6.7 percent in 2012, easing to 6.5 percent in 2013, then jumping to growth rates of 8.7 percent and 8.5 percent in 2014 and 2015, respectively. For all the attention the Philippines attracts as ‘one of the fastest-growing economies in Asia,’ on a percentage basis it trails Myanmar by a wide margin, and will probably do so for the next several years at least, if the new democratic government continues its aggressive drive to attract badly needed outside investment.

Such things are relative, however; Myanmar is growing as rapidly as it is because it is starting from a much lower base. With the economy stagnating under corrupt military rule for nearly 20 years, Myanmar is growing by leaps and bounds because it is still relatively backward compared with its regional neighbors, and has a great deal of catching up to do.

That being the case, Myanmar’s imports have surged; they vary from month to month, but have reached well above $1 billion in 11 of the past 12 months—in a country where per capita GDP is a mere $824—and in July of last year, reached nearly $2 billion.

That massive influx of goods has put the country’s port infrastructure under severe pressure. Like the Philippines, international shipping is badly overconcentrated, with most everything arriving in the ports serving the economic center and former capital Yangon. There are two ports that serve the city, the Myanmar Industrial Port (MIP), which is the older and less capable of the two, and the more modern, higher-capacity facilities operated by Asia World. The situation is roughly comparable to that of Manila, where the larger, more modern ICTSI terminal operates alongside the smaller, older terminal of ATI, except in Manila’s case, both facilities are significantly more sophisticated and have a higher capacity than their Burmese counterparts.

Besides having the similar problems that Manila experienced last year—ports that could not cope with the volume of container cargo being landed, because poor road infrastructure and red tape prevented it from being moved inland quickly enough—Myanmar has an additional handicap: Asia World is among the companies owned or controlled by tycoon Stephen Law (whose real name is Htun Myint Naing), who was slapped with sanctions by the US in 2008 due to his close association with Myanmar’s former military rulers. The practical effect of that is most western exporters and shippers avoid using the Asia World-owned facilities, because doing so could lead to penalties. That means a majority of imports are being funneled through the MIP, which cannot unload, store, or move the volume of incoming cargo, with predictable results—gridlocked land traffic “all the way to the Chinese” border, aggravated in part by a Chinese crackdown on sugar smuggling, and ships waiting for up to two weeks for their turn to be unloaded.

Just as Manila did toward the end of last year, Myanmar was able to clear most of the backlog within a couple of weeks by implementing some radical measures. Those measures, which even included specialists from some of the major shipping lines like Maersk being dispatched to Myanmar to serve as logistical consultants, have had to remain in place to keep the goods moving, an imperfect and almost certainly temporary answer to the fundamental problem of thoroughly inadequate infrastructure.

Myanmar’s recent experience should serve as an example to the incoming Philippine government of what can and probably will happen here again. The visibly growing traffic gridlock along routes serving Manila’s ports may be an early indicator the process has already started, and the old port problem is likely to recur if the new Administration’s priorities of expanding infrastructure development and improving the Bureau of Customs are not aligned with the objective of keeping cargo moving smoothly. While most observers are cautiously optimistic about the economy’s prospects under Duterte in the next year or two, there seems to be little margin for withstanding the unexpected, or in the case of port congestion, the entirely avoidable.